What will it take for Apple to get back in Wall Street's favor? Here are 3 things
HS 31/07/2025
It’s going to take a lot from Apple earnings to get the iPhone maker out of the penalty box. In fact, Jim Cramer said earlier this week that “Apple’s on the red-hot griddle,” among the Big Tech names slated to post quarterly results over the next two days. Fellow Club holdings Microsoft and Meta Platforms report Wednesday evening, while Amazon joins Apple after Thursday’s close. According to data provider LSEG, Apple’s earnings per share (EPS) are expected to have advanced 2% year over year to $1.43 in its fiscal 2025 third quarter, ended in June. Revenue for the quarter, per LSEG, is seen rising 4% to $89.54 billion. Through its financials and post-earnings commentary, Apple needs to find a way to flip the script on investor concerns — from a lagging artificial intelligence strategy to tariffs to legal hurdles — that have caused its awful stock performance in 2025. Shares have lost more than 16% year to date versus the S & P 500 ‘s more than 8% advance. The stock’s fall from grace has been swift and looks even worse when compared to its nearly 31% gain last year following a nearly 50% rise in 2023. Apple headwind trifecta The staggered rollout of the company’s AI features, Apple Intelligence, has pushed out expectations for a much-needed iPhone upgrade cycle. Apple is flailing on AI while its tech peers are driving forward. There have been reports that Apple might be looking to buy an AI company, maybe even Perplexity. Trade uncertainties linger as President Donald Trump rushes to cut as many deals before his self-imposed “reciprocal” tariff deadline on Friday. China and India are the big ones for Apple. While most iPhone production remains in China, Apple has been moving more and more manufacturing to India. On the last earnings call , CEO Tim Cook said the company plans to source U.S.-sold iPhones from India and the rest of the world’s supply from China. Apple faces significant legal challenges, including the Justice Department’s antitrust case against Alphabet , which threatens billions of dollars in payments for Google search priority. Long-running battles with Fortnite maker Epic Games have loosened Apple’s grip on app commissions. Apple said these changes would cost the company “substantial sums. ” “Apple also needs to get past key overhangs — namely concerns around Services growth (answered at earnings), the implementation of Section 232 tariffs (imminent?), and the upcoming DOJ v. GOOGL remedy ruling (“by August”) – before we’d feel more confident that Apple can sustainably break out of its $195- $215 trading range,” Morgan Stanley said in a July 21 note. Shares on Wednesday closed down more than 1% to just over $208 apiece. We have our hold-equivalent 2 rating on the stock and a $240 price target. So, what will it take to get Apple back in favor with Wall Street? Here are three things we would like to see in the company’s quarterly numbers and hear on the earnings conference call. Positive trade news : Any commentary from management on plans to further and more aggressively diversify its supply chain out of China will be key, as the White House demands that device manufacturing move to the U.S. Apple is in a difficult spot. There’s still a lot of uncertainty regarding Trump’s trade policies. Back in May, assuming tariff levels at the time, Cook predicted $900 million in added costs during the June quarter. He would not go further than that. Tons have happened since then, including U.S. negotiators saying Tuesday that trade talks with China this week ended with no tariff truce. On Wednesday, Trump said India would have 25% tariffs if no deal is reached before Friday. Let’s just hope that management can provide some more clarity on the matter during Thursday evening’s post-earnings conference call. Better-than-feared services revenue : This business, which makes money from the App Store, iCloud storage, Apple TV+, and more, has become a crucial part of Apple’s profitability. Services have been a huge growth driver in recent years, helping offset weakness in iPhone sales. That’s because the services unit collects revenue from paid subscriptions, licensing deals — like those from Google — and other recurring income streams. But this crown jewel is at risk, in part, due to the ongoing legal cases mentioned above. Investors may see the impact of the Epic Games battle during Thursday’s release. To be sure, we won’t get any clarity on the knock-on effects from Google’s legal battle until August, though. AAPL YTD mountain Apple (AAPL) year-to-date performance On Monday, Bank of America described Apple’s App Store as “a cornerstone of its Services revenue and profits” and that any rule changes “could erode this lucrative business.” “The concern is that new laws and court decisions are forcing Apple to open up its walled garden, which in turn may reduce the 30% commission ‘app tax’ Apple collects on many transactions,” the analysts added. “Since App Store fees are high-margin, any loss of this revenue disproportionately would hurt Apple’s profits.” It doesn’t help that Apple’s services business missed analysts’ revenue estimates last quarter, too. Any upbeat commentary management can give Wall Street on this segment — and when to expect a reacceleration — would be welcomed news. Generative AI clarity : We’re unlikely to see any product announcements, but increased AI investments would help assuage concerns. Not only has Apple’s release of AI features been lackluster and delayed, but the company has been losing its top talent, too. Four AI researchers at Apple have left in the past month for Meta’s superintelligence team, Bloomberg reported Tuesday. Material investments in AI would help Apple catch up to its Big Tech counterparts. Better AI offerings will not only increase device sales but can boost services revenues, depending on how they decide to monetize the features. Remember, Apple has rarely been first to market with its products. It does, however, continue to release the best ones. Case in point: Apple didn’t invent the smartphone, but the iPhone is now the company’s biggest money maker. Apple also wasn’t the first to make headphones, but AirPods have been an enormous commercial success. Bottom line As Jim phrased it in late June , the firm makes “the greatest product in the world,” and that’s exactly why the Club stands by its “own, don’t trade” thesis on shares ahead of the quarter. “As long as they have the greatest product in the world, I’m going to support that company,” he added. On July 11 , during the Club’s third annual meeting, Jim said he’s still backing Cook despite calls for the CEO to resign. “He’s made us a lot of money. He gets the benefit of the doubt.” (Jim Cramer’s Charitable Trust is long AAPL, AMZN, META, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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